Hurricane Irma was by many measures one of the most devastating hurricanes to ever hit the state of Florida. However, trading action on Wall Street this week suggests insurance investors had feared Irma’s wrath would be a lot worse.
On Monday, insurance giant Travelers Companies (NYSE: TRV) said it will be suspending its share buyback program temporarily while it assesses its Irma liabilities. Travelers also reported estimated catastrophic losses related to Hurricane Harvey in the $375 million to $750 million range.
While it’s still too early to accurately estimate damages from Irma, investors seem to believe most insurance companies dodged a bullet. Insurance stocks with heavy concentrations in the Florida market are all up big this week after crashing prior to Irma’s arrival. Shares of United Insurance Holdings Corp. ( UIHC), Universal Insurance Holdings ( UVE) and HCI Group ( HCI) are all up more than 10 percent since Friday’s close. Heritage Insurance Holdings ( HRTC) stock is up more than 20 percent.
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Stocks of reinsurance companies, which help insurance companies cover the cost of their policies, are also recovering this week. Shares of Everest Re Group ( RE) are up 3.7 percent and shares of XL Group ( XL) are up 4.6 percent.
When catastrophic liabilities become too high, reinsurance companies must raise capital rather than simply relying on earnings to cover their payouts. On Monday, S&P Global Ratings said the recent U.S. hurricanes are “more likely to be earnings events than capital events” for reinsurance companies.
“The financial impact on the insurance industry is probably going to be a little bit lower than initially expected,” Niklaus Hilti, managing director and CEO of Credit Suisse Insurance-Linked Strategies, said on Monday. “With Harvey, with Irma, I think we’re definitely talking for the insurance industry already now around $60 to $70 billion of insured losses.”
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The market is reacting positively to news that Irma’s impact wasn’t the worst-case scenario that many had feared. But as Travelers’ wide range of projected losses from Harvey suggests, it will likely be quite a while before insurance companies and their investors know exactly how much of an impact the storm had on their bottom lines.
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Insurance Stocks Surge After Florida Avoids Worst-Case Scenario originally appeared on usnews.com
